In the meantime, Politico reports that House Oversight and Government Committee Ranking Member Darrell Issa (R-CA) will be introducing legislation later today to repeal Section 929I, the provision that prohibits the SEC from publicly disclosing any “records or information” provided by its regulated entities if the SEC uses the information for “surveillance, risk assessments, or other regulatory and oversight activities.”

The issue came to a head this week as part of an ongoing FOIA dispute between the SEC and the FOX Business Network.

FOX Business sued the SEC in March 2009 for failing to produce documents related to the agency’s botched investigations of the Madoff and Stanford Ponzi schemes. Now the SEC is arguing that a provision in the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act exempts the agency from releasing any documents related to FOX Business’s request. Some lawyers are even interpreting this provision to mean that a vast majority of the SEC’s records will be exempt from public disclosure.

We just took another look at the bill, and found this and another troubling provision that could potentially provide the SEC with broad FOIA exemptions. Section 404 also makes any information, reports, documents, or records provided by investment advisers of private funds to the SEC and the Financial Stability Oversight Council non-public.

The vague language in these provisions (“other regulatory and oversight activities”) could be interpreted to mean that virtually all SEC activities will be exempt from FOIA. Steven Mintz, who is representing FOX Business in its case against the SEC, attacked what he described as a “backroom deal that was cut between Congress and the SEC to keep the SEC’s failures secret,” and warned that “the next time there is a Bernie Madoff failure the American public will not be able to obtain the SEC documents that describe the failure.” Gary Aguirre—a former SEC enforcement attorney who headed the investigation of Pequot’s insider trading and recently settled with the agency for wrongful termination—pointed out that he “relied heavily on records obtained from the SEC through FOIA in communications to the FBI, Senate investigators, and the SEC in arguing the SEC had botched its initial investigation of Pequot’s trading,” and concluded that “it’s hard to imagine how the bill could be more counterproductive.” And Elizabeth Warren—Chair of the Congressional Oversight Panel and a potential nominee to serve as the first head of the new Consumer Financial Protection Bureau—recalled that FOX Business’s previous FOIA efforts “produced 250,000 pages of documentation” and played a “very important part” in the Panel’s investigation.

On the other hand, SEC spokesman John Nester argued that this provision is simply intended to “make certain that we can obtain documents from registrants for risk assessment and surveillance under similar conditions that already exist by law for our examinations.” He claimed that some companies might be hesitant to provide sensitive documents to the SEC if there was a possibility that the documents could one day be obtained through FOIA. Meanwhile, Zach Goldfarb at Market Cop wrote that “people and organizations can still use FOIA to obtain a range of SEC information, such as inspector general reports; communications with Congress and the business community; and officials’ calendar, salary and conflict-of-interest information.”

When we first read these provisions, we were immediately reminded of a similar debate on public access to information provided to the SEC by whistleblowers. At one point, the financial reform bill included poison pill secrecy provisions that would have exempted from FOIA all of the information provided by the whistleblowers. Offered under the guise of whistleblower confidentiality, these provisions would have prevented the public from knowing what happened as a result of a whistleblower tip, even if no action was taken due to bureaucracy, fraud, collusion, or worse. They also would have prevented whistleblowers from accessing the information they provided in order to establish a retaliation claim (fortunately, Congress ultimately decided to replace these provisions with a compromise worked out by Chairman Towns and Senator Patrick Leahy that struck a much better balance between whistleblower confidentiality and the public’s right to access information).

We heard at the time that the idea for these secrecy provisions originated at the SEC. Now the agency appears to be making similar arguments in favor of blanket FOIA exemptions on information collected from regulated entities. Once again, we’re not convinced that these blanket exemptions are necessary, since FOIA already protects against the release of “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential,” and the SEC already has strict rules in place to protect against the release of information from ongoing investigations.

If nothing else, the SEC’s ongoing efforts to withhold information in the FOX Business lawsuit and other cases would appear to undermine the overall spirit of the Wall Street reform bill, which seeks to improve transparency and accountability across the financial system. The SEC’s position also flies in the face of President Obama’s guidance instructing agencies to adopt a “presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA, and to usher in a new era of open Government.”

In fact, a recent audit by the SEC Office of Inspector General (OIG) found that the agency uses “inadequate or incorrect procedures” for responding to FOIA requests and applying exemptions, which has the effect of “creating a presumption in favor of withholding, rather than disclosure, as required by the FOIA.” The audit concluded that the SEC’s FOIA disposition rate is “significantly lower when compared to all other federal agencies” (emphasis added).

Furthermore, there is evidence to suggest that the SEC routinely keeps investigations open so that it can take advantage of a FOIA exemption that protects against the disclosure of information compiled for law enforcement purposes if such disclosure “could reasonably be expected to interfere with enforcement proceedings.” Aguirre argued in his case that the SEC’s Office of General Counsel has repeatedly used this exemption, even when an investigation is effectively finished or inactive, in order to prevent the disclosure of potentially embarrassing information.

All in all, there’s no question that the SEC is an agency in need of some serious transparency. Now is certainly not the time to give the Commission even more authority to keep its records under a veil of secrecy.